Business Competition

by Ron Kurtus (revised 6 October 2011)

A business is an organized effort to sell products and services on a regular basis.

Competition between manufacturers consists of developing products that retail stores want to stock. Competition between businesses or stores consists of trying to get the customer to buy their product instead of the one offered by the competitor.

In such cases, there is a clear winner and loser. But in the larger picture, businesses compete to see which has the greater market share and is more successful. There are three main models for competing in business.

Questions you may have include:

What is manufacturing competition?

What is competing for sales?

What are the business competition models?

This lesson will answer those questions.

Manufacturing competition

Companies making similar products compete in the areas of wholesale price, innovations, marketing and distribution, among other areas. These businesses sell their product to retail outlets and stores that may handle a range of similar products. Thus, a sale to one store or business is not really a win over the competition, because they may also sell to them.

The success of manufacturers depends on who makes the most appealing products at the lowest prices, plus who has the best distribution channels.

For example, Apple Computer has been known to make innovative products that are very stylish, although somewhat more expensive than other computer manufactures. They have a successful niche in the computer and electronic gadget market.

Competing for sales

Competing for an individual sale determines a winner and loser among businesses. The total sales determines the success of the business in the competition.

Individual sales

When a customer considers buying a product or service, there is a competition among all businesses offering that item or something similar. They are competing on the basis of price, availability, location of the store, and the quality of the extra service provided, among other factors. The purchase determines the winner and the losers in that particular sale. Then they move on to the next sale.

Success

As the number of wins and loses add up, it is a determination of which company is more successful in competing for customer sales. Those that are behind the leader may change their marketing strategies or even location in order to move ahead. Some businesses will do so poorly that they abandon the cause and go out of business or change to a different product-line.

Types of competition

Businesses compete through performance, head-to-head and predatory types of competition.

Performance

Most businesses follow the affected performance competition model. That is, they have knowledge of what their opponent companies are doing and this affects their own strategies. In selling the same product, their performance determines their success.

For example, Nostrom department store has been known for extraordinary service. This service have won over customers from stores that offered less expensive items but also ordinary service.

Head-to-head

Some companies go into a head-to-head competition, where they not only try to beat the opponent in performance, but they also take actions to try to prevent the opponent from making sales. This can include negative advertising that criticizes the opponent, locating a store right next to a competitor's store, and controlling supply of goods.

For example, some beer distributors will gain concession agreements that lock out opponents from selling their brands of beer at entertainment events.

Predatory

Some large companies not only want to be successful in their competitions, but they also want to have complete control or monopolies in the marketplace. They make efforts to drive smaller companies out of business or even simply purchase them to take them out of the competition.

One method is the hostile takeover, where a company or even wealthy individual will purchase enough stock in a competing company in order to take control of it. They may them dismantle the company and sell off pieces, thus eliminating a competitor.

Summary

Businesses want to sell products and services on a regular basis. Competition between manufacturing businesses consist of developing products are more appealing. Competition between stores consists of trying to get the customer to buy their product instead of that offered by the competitor. The three main models for competing in business are performance, head-to-head and predatory.